Why 'Steering' Housing Prospects is Bad Practice

Have you been thinking about buying a home? Most people hire a real estate agent when they want to buy a house. They share their budget, their needs, and the neighborhoods that they are considering moving to.

Ideally, the real estate agent should send them a listing that fits their requirements. The agent should be able to answer all their questions and help them make the best decision for themselves and their families.

In reality, many homeowners, especially minorities have a very different experience. You will still find real estate agents who steer buyers to certain neighborhoods, based on discriminatory factors such as race, color, and religion. Steering creates widespread neighborhood segregation that is still prevalent in the US to this day.

What is steering?

Steering refers to an illegal practice where a real estate agent influences the purchase decision of homebuyers based on race, color, or other discriminatory factors. It involves showing prospects properties in certain areas instead of showing them in areas that the homebuyers are really interested in.

Let’s illustrate with an example. A real estate agent has two buyers- a white and a black one looking to buy a home. The financial profiles of both buyers are the same, and both of them have similar requirements for the house they are looking for. The agent sends the white buyer listings of predominantly white neighborhoods in 6 different communities. For the Black buyer, the agent sends a listing from 3 communities that are predominantly black or mixed race. So, what’s happening in this scenario is that the agent is trying to steer the buyers to neighborhoods based on their race instead of their requirements.

In reality, white buyers are given more housing options in white neighborhoods and are often advised against moving to other neighborhoods. On the other hand, Black buyers are steered towards Black neighborhoods and are often given fewer options than white buyers.

According to the HUD review of the state of fair housing in the US:

- African Americans are shown 4% fewer units and are informed about 11% fewer units.

- Hispanics are shown 7% fewer units and informed about 12% fewer units.

- Asian Americans are shown 7% fewer units and informed about 10% fewer units.

In the US, segregation and housing discrimination have been illegal since 1968, but the steering still happens.

What does steering look like in reality?

If a real estate agent is steering you, it may not be so obvious to you. Here’s what steering looks like in real life.

- White buyers may be shown many more home listings compared to minority homebuyers.

- Discouraging white buyers from living in certain neighborhoods by citing “safety issues,” or giving them false reasons such as “bad schools.”

- Agents assume that a white buyer would only want to live in a neighborhood that’s predominantly white, and therefore show them homes in those areas only.

- Provide different information to white buyers and minority buyers. For instance, if there have been some recent break-ins in an area, agents will ensure that they tell their white buyers all about it. However, they will not notify the minority buyers about it.

- Agents disparage minority communities to white people.

To sum up, a real estate agent is supposed to give equal professional advice to all their clients. If they are making assumptions based on race or color, they may be steering their clients.

What does the law say?

According to the Fair Housing Act, it is illegal to discriminate against people based on color, race, sex, religion, disability, family status, or ethnicity. All these factors are called protected characteristics. Many US states have adopted the minimum FHA requirements and have added other protected characteristics, including:

- Gender identity

- Sexual orientation

- Criminal record

- Source of income

- Creed

- Political belief

- Military status

Other forms of illegal discrimination may include:

- Offering less favorable or different terms, conditions, or privileges for housing based on the protected characteristics.

- Refusing to rent, sell, or deny housing to people based on protected characteristics.

- Engage in advertising that indicates a protected characteristic as a preference for housing.

- Make misrepresentations about the availability of housing because of discriminatory practices.

Steering is unlawful because it offers limited choices to prospects and denies them the opportunity to get housing of their choice. When steering becomes widespread it creates or maintains segregation among communities, neighborhoods, towns, and cities.

What are the consequences of steering?

Steering can have far-reaching effects, especially on the minority community. As a consequence of steering, marginalized homebuyers have:

Fewer options in housing

Minority communities have fewer housing options because of steering. Black buyers and other minority communities are consistently shown fewer options by real estate agents, which limits their housing selection options.

Low ownership rates and home appreciation

Due to steering, houses in Black and minority neighborhoods do not appreciate as much as in white neighborhoods. That’s why homeowners in these neighborhoods do not build as much wealth as others. 

Discriminatory practices in real estate markets such as steering create lower housing demands in these neighborhoods. When demands are lower, home prices do not rise as much.

School quality

The US has had integrated schools since 1954. However, segregation happens to date. According to a recent report, nearly 50% of all the students in the US go to “racially concentrated” schools. It means that nearly 75% of all students in these schools are of the same race. The same report also states that compared to white schools, non-white schools get $23 billion less in funding, even if they have the same number of students.

Lack of upward mobility

Steering also affects minority communities in that it limits their upward mobility. It is one of the major reasons why a high number of minority households are found in high-poverty areas. It is also a key reason for a consistent gap in income mobility between white and non-white households.

Pollution

Steering can also affect the health of homebuyers as minority communities are often pushed towards areas of high pollution. According to a study by Ohio State University, disease-causing air pollution is stronger in certain areas of the US, and these areas are mostly populated by minority communities and those with low income.

What is the punishment for steering?

According to HUD, there are high civil penalty amounts for steering and violation of the FHA. If you have violated FHA guidelines for the first time, you may need to pay a penalty of up to $21,039. The fine could be as high as $52,596 if someone is found to have a previous violation in the recent five years.

Anyone who violates the FHA two or more times in the recent seven years may have to pay a penalty of up to $105,194.

Conclusion

Leasing vacant units is part of every property manager’s job. However, they should always use the right sales techniques, such as showing the amenities or installing brand-new appliances. Steering is never the right way to make a sale.

Property managers have a lot on their plate and property management software could make lives easy for them. ExactEstate’s property management software comes with a host of features such as online leasing, online payments, accounting, tenant screening, and more.

ExactEstate could be the ideal partner to grow your rental business. Schedule a demo today to know more.